Brexit: A vote for homegrown fresh?

By Matt Rawlings

Five Guys restaurateur and Carphone Warehouse billionaire Charles Dunstone recently said of Brexit, “It’s a little bit like we’ve jumped off a 100-storey building and have just passed the 50th floor and we’re saying, ‘Actually this isn’t so terrible’ – but we haven’t hit the pavement yet.”

For the fresh food supply chain, chances are we’ll be hitting the ground sooner than most. Already we’ve had #Marmitegate and FishFinger wars, where the supermarket chains have fought back against Brexit-induced price hikes from the large brand owners such as Unilever and Birds Eye. There will be more jostling to come as the uncertainty over what Brexit means will vary according to retailers’ ability to use their scale and rate of growth to negotiate. While if the UK goes hard on immigration, we could end up with no fresh vegetables on our tables because we will simply have no one to pick it.

So as we tumble towards ground zero, can our supply chain still land on its feet? Jonathan Kittow, of Simply Supply Chain, says yes but it’s going to be a potentially bumpy landing.

In an interview with iTradeNetwork, Jonathan tells us, “Brexit is fundamentally challenging what happens to the UK Supply Chain. Currently, the UK is 61% self-sufficient in food. The cheaper pound will make European imports more expensive and therefore there is an opportunity for making more of what we’ve got at home.”

With many commentators seeing Brexit as a vote against Globalisation, consumers are preferring British-grown food, and as a result, suppliers with distribution centres in Europe are now looking at their options to invest in a UK base.

Five Guys hamburger restaurants have said they are looking at options to absorb the cost of importing all their beef from Ireland or to change to a UK beef supplier, while many suppliers would do well to take a leaf out of Fresca Group. A British company in consortium with three Dutch growers, it built the UK’s largest greenhouse on the Isle of Thanet (Thanet Earth) and now produces 12% of all tomatoes grown in the UK, with a new greenhouse opening in 2017 which will bring their production to around 18%.

“Fresca Group leveraged their horticultural capability and found a means of reducing cost to market,” says Jonathan. “All the major retailers are trying to work out with suppliers how to reduce end-to-end supply costs in the wake of Brexit. They are already losing market share to the discounters so they are trying to cap the mounting inflationary costs coming through, or at least not be disadvantaged by it. The discounters on the other hand who are importing goods will suffer from the currency fluctuations worse than the homegrown retailers. We haven’t seen it yet because in the run up to Christmas we are seeing artificially restrained prices.”

Everyone, he says, wants to get through Christmas but come January we’ll start hitting the pavement and price rises in the food supply chain will inevitable.

With a perfect storm of uncertainty over Brexit, rising inflation, and low sterling, reducing cost in the supply chain as we move into 2017 has never been more crucial. Tesco and Sainsbury’s both recently announced they would cut operational costs by as much as £500 million each over the next three years, while Marks & Spencer said it would make savings by putting more products in shipping trays to cut transport costs.

“Some supply chains are very efficient to a degree, but there is always room for savings,” adds Jonathan. “Yes, it is about sending fewer trucks, fuller and less often but it is also about looking further down the supply chain, such as changing the stringent quality controls on what fresh produce is acceptable. The public are now much more receptive to accepting ‘wonky’ fruit and vegetables, so there are opportunities to steal share, reduce cost and keep margin by offering lower cost products that haven’t been offered previously. And farmers will be happier because they can sell a much higher percent of their crop, as up to 40% was being discarded, previously.”

He concludes, “All businesses simply want is to have some assurance that when we trigger Article 50 the wheels aren’t going to fall off so that they can make some prudent judgments now on where they can take costs out.”